Strong rand could negate bigger dividend for Richemont shareholders
Inventory buybacks continued to drag earnings down in the year to end-March
The rand strengthening against the Swiss franc is bad news for Richemont shareholders, who are likely to see a drop in their dividend in local currency.
Richemont declared a Sf0.19 dividend in its results for the year to end-March, released on Friday morning. That was up 7% from Sf0.18 in the prior year.
However, at Friday morning’s exchange rate of R12.58 to the Swiss franc, the dividend equates to about R2.39, down from the prior year’s R2.43.
The exchange rate Richemont will use to pay its South African shareholders will be announced on September 11.
The group’s overall sales grew 3% to €10.98bn, and its net profit by 1% to €1.2bn.
The group’s watch division suffered a 6% decline in sales to €2.7bn.
"Excluding inventory buybacks in both years, sales would have been broadly in line," Richemont chairman Johann Rupert said in the results statement.
"Richemont’s voluntary tender offer for the world’s leading online luxury retailer, Yoox Net-a-Porter, aims to accelerate our ability to satisfy today’s sophisticated and globally dispersed clientele, and demonstrates our commitment to developing a robust omnichannel proposition," he said.
"Reflecting our view that travel retail spending will increase over time, we also invested in Dufry, a leading travel retail specialist listed on the SIX Swiss Exchange.
"In addition to continuing to address the challenges that affect our watch businesses, we further focused on developing our capabilities in leather goods."
Of the five geographical regions Richemont segments its results into, Asia Pacific was by far the largest and best performing.
Sales from Asia Pacific grew 12%, offsetting 3% declines in Europe, Japan, and Middle East and Africa, and flat sales in the Americas.
Asia Pacific accounted for 40% of the group’s total sales.
In local currencies, Asia Pacific sales grew by an even more impressive 17%.
"This performance was led by China, Hong Kong, Korea and Macau, and, at product level, driven by jewellery and watches. Both retail and wholesale channels saw double-digit growth," Rupert said.
Richemont’s next-biggest sales region is Europe, accounting for 27% of the group’s total.
In local currencies, European sales declined 2%.
Rupert said sales were negatively affected "by the relative strength of the euro, inventory buybacks in the fourth quarter of the year, tight inventory control at the external points of sale of the group’s multibrand retail partners, and the optimisation of the wholesale distribution network".